How one of Oregon's oldest arts organizations tanked

Fredrick D. Joe/The OregonianThe Museum of Contemporary Craft moved to the Pearl District in the summer of 2007, where it became the anchor tenant of developer Jim Winkler's ambitious hub for art businesses.

Imagine buying your dream house in a dream neighborhood after waiting many years. Imagine paying the mortgage but charging food, clothing, furniture and other bills and necessities.

Imagine, then, when luck and credit run out. Where do you go?

For many facing this nightmare, the next step means foreclosure.

But for one of the oldest arts institutions in Oregon, the 72-year-old Museum of Contemporary Craft, the next step was a takeover -- still a legal work in progress -- by the Pacific Northwest College of Art.

The Portland museum's collapse in January is a familiar tale of entrepreneurship turned parable of survival. Like speculators buying property with subprime loans, the unchained risks of the museum's then-executive director, David Cohen, were rooted in audacity. Cohen wanted to reinvent the museum, but he did it by ignoring nearly every fundamental principle that nonprofit experts follow. What's worse, the museum's board let it happen.

"This was a great idea," says Cohen, who stepped down as executive director in October and is looking for work. "It just wasn't a fundable idea. We took the chance that once we built something, people would come. Then we'd go out and raise the money to pay for it."

Michael Lloyd/The Oregonian, 2007Former executive director David Cohen has been looking for work since he stepped down from his post late last year.

Slouching toward the Pearl

When Cohen took over in 2002, he felt that the drowsy crafts museum was on a course to fall off the art world map. So the 53-year-old native New Yorker, who once worked at the Portland Center for the Visual Arts, persuaded the board to transform the museum.

Back then, it was known as the Contemporary Crafts Museum & Gallery and had spent its life on Southwest Corbett Avenue, where it had crafted a loyal following. Steeped in the city's midcentury art history, the craft museum was really a neighborhood center that empowered a community of artisanal lovers. Yet its influence had become more illustrative. With about 12,000 visitors a year at most, it seemed a faint light from the dimming Modernist heyday.

"We were once a leader in the art community," Cohen says. "And we wanted to be a leader again."

The art world is constantly aspiring. Bigger is better, more is great. At the time, museums, including the Portland Art Museum, lived off chutzpah and mojo, expanding their campuses without worry of the hangover bills that would arrive later. Cohen envisioned a museum that could play the art game as seriously as anyone.

Opportunity arrived for the craft museum in 2005, when Portland developer Jim Winkler began to look for buyers to create an art hub on the North Park Blocks, in the DeSoto Building. The museum wanted to be its anchor tenant, occupying the most square footage of the five arts businesses.

Led by Cohen, the museum orchestrated a plan to move beyond its core following and modernize with an alluring space, aggressively contemporary programming and, they hoped, new patrons with deeper pockets. To make the brand fit the vision, the nonprofit also updated its name, to the Museum of Contemporary Craft.

To accomplish all of this, the museum staff raised about $7.1million in roughly two years, $2million from the sale of its Southwest Corbett space alone. Cohen was jubilant. Many, including some museum followers, had underestimated the museum's nerve and grit. And maybe they had misjudged the friendly, shaggy-haired director, too.

But when a campaign ends, a fussy grind replaces vision. Time to roll up the shirt-sleeves and pay the bills. Small steps replace big leaps. Longtime Portland arts consultant George Thorn says this transition demands organizational balance.

"Every organization has an equation," says Thorn, who has advised many local arts nonprofits. "On the one side is what the nonprofit is trying to do, like curatorial programming. On the other side is the human financial time and resources that are available to it."

The museum's personnel changes explain that imbalance. In spring 2007, for example, three of the museum's roughly 13 full-time staff equivalents were working to raise money. But a year later, only two-and-a-half of the 22 full-time staffers were raising money for a budget nearly twice as large the previous year. Personnel expenses dwarfed income.

That shift in focus and internal chemistry began soon after the museum opened its Pearl District doors in summer 2007. Cohen already was cutting corners around details he embraced during the capital campaign, details that protect an institution from financial and other vulnerabilities.

The museum staff, for example, was overworked -- "burnt to a crisp" Cohen says. So much so the museum didn't try to raise the $300,000 in cash reserves it wanted to have before opening -- a crucial lifeline for a museum without an endowment and a savings account of $22,400. Part of the capital was used to purchase and renovate its new home, part of it funded operations.

Exhausted staffers, including the development director, started to depart for other opportunities. Yet departing staff members weren't always replaced in a timely manner. The fundraising position went unfilled for several months, which eventually proved fatal.

There were also new budgets and administrative responsibilities to grasp, like financial reports. But Cohen rarely produced them regularly. He wasn't cavalier, Linda Mantel, board chairwoman from 2004 to 2008, says. He was overwhelmed, struggling to master a growing list of obligations.

For its part, the board didn't maintain the oversight it should have, Mantel says. It lost touch with the museum's daily activities and financial picture.

"We didn't get day-to-day or month-to-month information," she says. "No one was hiding anything. It just wasn't a priority."

Blinding ambitions

From the outside, the museum may have appeared transformed, but internally it struggled to balance ambitions and capacity. That might not have mattered so much if the museum didn't keep taking financial risks.

Nonprofit experts agree that institutions should phase in growth, like new programs, and stabilize operations, especially after a fundraising campaign. But Cohen favored daring trajectories and gambles.

"I am an unorthodox leader," he says. "I never do things by the book. I had been successful pretty much all the way through this by doing things differently. And after we revived this once-dead organization, I felt we were on a roll."

Last spring, 10 months after opening in the Pearl, Cohen persuaded the board to approve a $2.2million budget, nearly twice as much as the previous year.

Compared to other museum budgets, $2.2 million is modest. But given the craft museum's struggles, meager savings and a fundraising environment hinting at a recession, the vaulting budget size seems careless in retrospect, maybe even quixotic. According to Mantel, the museum already was drawing heavily from the equity on its building and had yet to consolidate a patron base to match its appetites.

Cohen speculated that future fundraising and pledges could pay off debt and that enhanced programs would enlarge the core audience and secure donors who might contribute not thousands, but tens of thousands and more.

The show that christened the museum's new space, for example, was "Craft in America," an expansive, traveling exhibit that cost $46,000, the most expensive project the museum had ever presented.

Other dynamic exhibits followed, including retrospectives of enduring Oregon craft masters such as Ken Shores and a show by glass artist Melissa Dyne, the sort of conceptual exercise that would have been unlikely before.

Most of these projects were received positively, but the museum didn't really have the money to fund all of them.

"I wanted us to be a leader the moment we opened our new doors," Cohen says.

Wiggers agrees. "How can you build a new audience if you don't show them what you can do first?"

Others once inside the museum now wonder.

"We moved and immediately became another institution," says Marc Moscato, the museum's marketing manager in 2008 and a casualty of its October layoffs. "Yeah, the programs and exhibits changed, and the shows were more contemporary. But the whole identity thing -- maybe it was rushed. We should have grown into it."

According to arts consultant Thorn, the museum's expanded programming should have been introduced only when it had achieved a proven revenue stream.

"The reason organizations have deficits is usually because they're overprojecting or underachieving or both."

Marv Bondarowicz/The OregonianThen-gallery director Kristin Shiga tends to items in the museum's gift shop in November 2007. The gift shop experienced dramatically increased foot traffic after the museum moved to the Pearl District, and its sales accounted for a good portion of the museum's income.

Takeover, anyone?

Indeed, the numbers lay out the story.

In summer 2005, the museum had roughly two full-time curatorial and education staffers. By spring 2008, curatorial and education staff generated the most expense, with more than six staffers. Meanwhile, the museum spent most of the year without a development director. And it still had little cash.

Late last summer, Cohen and the board finally grasped the peril. But it was too late. The recession had arrived. Fundraising had dried up. And the museum was paying its bills mostly through credit, running up a roughly $1.1million debt.

By late October, the staff and budget had to be stripped. Cohen stepped down and became an hourly consulting adviser on development. Interim director Glen Gilbert immediately began to seek the most logical fallback: a takeover.

The museum approached three institutions, including the Oregon College of Art & Craft, but PNCA moved most aggressively and swiftly, Gilbert says. "We were not in a position to be too choosy."

Gilbert estimates the museum would have used up its $1.4million in credit by early February, and takeovers often take weeks, possibly months, to complete. Since January, PNCA has yet to chip in money; the museum is instead using its remaining credit to pay for daily operations.

Another shift is the crafts museum's just-announced fundraising effort to relieve part or all of its debt before PNCA inherits it. PNCA and museum officials would not release definitive terms of the takeover agreement, but they say the new fundraising was the museum's idea and not a prerequisite for the takeover. The museum doesn't have to raise a target or minimum amount, either.

Still, it's a curious strategy reminiscent of what got the museum in trouble: Using credit while trying to raise money in a hostile fundraising environment. Last October, the museum even made a last-ditch plea. Few patrons answered.

Meanwhile, the community will get a chance to express opinions in a series of PNCA forums in March and April. But already, the college has tried to quiet anxiety and the perception that it is a Machiavellian empire builder. It says it has long-term intentions and promises to honorably steward the museum's art collection. It also promises that craft will be central to its programming, even though PNCA has plans for major design initiatives.

Despite assurances, there's skepticism in an art community that's suffered several blows, including the loss of art galleries and an art fair. Six years ago, PNCA's financial and administrative problems could have led to the loss of its accreditation. Is it now financially and institutionally resilient enough to revive a museum in addition to its other projects?

After all, PNCA has its own expanding list of challenges that resemble the museum's: capital renovations, swelling programs and pacifying an overworked staff and faculty.

Although it's raised about $28 million in pledges and donations for a $32 million campaign, PNCA has limited cash, President Tom Manley says. Manley wouldn't release balance sheets or savings data and wouldn't clarify whether PNCA can cover all of the museum's debt.

Which further casts PNCA's strategy for the takeover as a kind of speculative bet. PNCA hopes to cover the museum's roughly $1million budget through the museum's retail sales gallery, fundraising efforts and by streamlining operations.
Bittersweet lessons
Gilbert, the interim director who left the museum at the end of February, says his experience has resulted in a tipsheet for every nonprofit.

"Even in the best of times, you don't spend money you don't have," he says. Also, boards should provide oversight and nonprofits should grow incrementally to mind operations. They should never stop raising money, either.

The museum, he says, ignored every one of these rules because it was blinded by "the headiness of a vision."

Cohen still believes in that heady vision.

"In order for this whole thing to have happened right, I needed a perfect storm of positive events to happen," he says. "Instead, what happened to us was the perfect storm of negative events."